Asia markets down as US-China trade talks loom

Asia markets were mostly down on Monday (Jul 29), with investors cautious ahead of US-China talks in Shanghai this week and amid more civil unrest in Hong Kong.

Analysts are pessimistic about a resolution to the year-long trade dispute between the world's top two economies that has seen $360 billion in tariffs imposed on bilateral trade AFP/HECTOR RETAMAL

Two-day discussions begin on Tuesday with a Washington delegation led by White House Trade Representative Robert Lighthizer.

But analysts are pessimistic about a resolution to the year-long trade dispute between the world's top two economies that has seen US$360 billion in tariffs imposed on bilateral trade.

"Hoping for the best but preparing for the worst best describes my view," said Vanguard Markets managing partner Stephen Innes. "We are not overly optimistic about a positive Shanghai surprise."

Hong Kong was among the biggest downward movers on Tuesday with the Hang Seng Index falling 1.2 per cent, after a fresh round of violent protests in the financial hub.

Pro-democracy protesters in the financial hub fought a second consecutive day of running battles with police on Sunday evening in a well-heeled residential district, a day after clashes at a banned rally in a town near the border with mainland China.

China's top policy body on Hong Kong affairs was set to hold an extremely rare press briefing on Monday afternoon on the crisis engulfing the financial hub.

The weekend protests were "factoring quite negatively into the overall risk equation, Innes said, with traders concerned that Washington may speak in support of the demonstrators.

"If they do, it would not only throw this week's trade discussion into disarray but could jeopardise bilateral trade negotiations going forward," he added.

Seoul was down 1.9 per cent amid an ongoing trade spat with Tokyo, which restricted export of materials key to South Korean tech firms earlier this month.

Elsewhere the Nikkei was down 0.6 per cent at the lunch break while Shanghai was 0.2 per cent lower.

RATE CUT EXPECTATIONS

Oil benchmarks were slightly down Monday after ending last week higher on strong US growth figures, and amid continuing tensions over Britain's seizure of an Iranian oil tanker earlier this month.

Expectations of a Fed rate cut have been priced into the market and could see downward pressure on the gold price, said OANDA senior market analyst Alfonso Esparza.

"A 25 basis points cut by the Fed following a more cautious approach could lead to downward pressure for the yellow metal, with the US$1,400 level under threat," he added.